Market Overview

A New ETF Off To A Blistering Start

A New ETF Off To A Blistering Start

Every year, hundreds of new exchange-traded funds come to market in the United States. While the number of new ETFs debuting in any given year is usually large, the number that ultimately prove successful is far smaller.

Ditto for those ETFs that burst out of the gate and immediately prove successful at gathering investor assets. In the most positive of ways, the Elkhorn Lunt Low Vol/High Beta Tactical ETF (BATS: LVHB) is breaking the rules for many news. After less than a month on the market, the LVHB is now home to nearly $60 million in assets under management, according to Elkhorn data.


“LVHB tracks the Lunt Capital U.S. Large Cap Equity Rotation Index, which is based on Lunt Capital's proprietary risk-adjusted momentum strategy and calculated by S&P,” according to a statement issued by Elkhorn.

The Lunt Capital U.S. Large Cap Equity Rotation Index rotates between low-volatility and high-beta stocks in the S&P 500. That is accomplished by the Lunt index being fully invested in the S&P 500 Low Volatility Index, tracked by the PowerShares Exchange-Traded Fund Trust II (NYSE: SPLV), and the S&P 500 High Beta Index. That low volatility index is the underlying benchmark for SPLV, while the high beta index is tracked by the PowerShares Exchange-Traded Fund Trust II (NYSE: SPHB).

SPHB's benchmark holds the 100 S&P 500 stocks with the “highest sensitivity to market movements, or beta, over the past 12 months,” according to PowerShares.

Sometimes, Timing Is What It Takes

As highlighted by the substantial inflows to LVHB, the new ETF was well-timed, a trait not worn by all new ETFs. LVHB came to market at a time when investors were departing low volatility fare for higher beta stocks and sectors, underscoring the new ETF's utility to move between those themes. The new Elkhorn ETF debuted and remains allocated to higher beta stocks.

Financial services and energy stocks currently combine for over 64 percent of LVHB's weight with technology names commanding more than 13 percent.

None of the ETF's top 10 holdings command more than 1.78 percent of the rookie ETF's weight. That group includes Freeport-McMoRan Inc (NYSE: FCX), Williams Companies Inc (NYSE: WMB) and Morgan Stanley (NYSE: MS).


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